ex10-9.htm


    
      EXHIBIT
10.9

      
 

      SECURITIES
PURCHASE AGREEMENT

       

      This
Securities Purchase Agreement (this “Agreement”) is dated
as of June 26, 2008 among Global Diversified Industries, Inc., a Nevada
corporation (the “Company”), Phillip O.
Hamilton, an individual (the “Shareholder”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and
collectively the “Purchasers”).

       

      WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.

       

      NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agree as
follows:

       

       

      ARTICLE
I.

      DEFINITIONS

       

      1.1 Definitions.  In
addition to the terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to such terms in
the Series C Designations (as defined herein), and (b) the following terms have
the meanings indicated in this Section 1.1:

       

      “Action” shall have
the meaning ascribed to such term in Section 3.1(j).

       

      “Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person, as such terms are
used in and construed under Rule 144 under the Securities Act.  With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.

       

      “BR” means Bush Ross,
P.A. with offices located at 1801 North Highland Avenue, Tampa, Florida
33602-2656.

       

      “Business Day” means
any day except Saturday, Sunday, any day which shall be a federal legal holiday
in the United States or any day on which banking institutions in the State of
New York are authorized or required by law or other governmental action to
close.

       

       “Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.

       

      “Closing Date” means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.

       

       “Commission” means the
Securities and Exchange Commission.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Common Stock” means
the common stock of the Company, par value $.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed into.

       

      “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.

       

      “Company Counsel”
means Crabtree, Schmidt & Jacobs.

      


      “Conversion Price”
shall have the meaning ascribed to such term in the Series C Convertible
Preferred Stock.

       

       “Disclosure Schedules”
shall have the meaning ascribed to such term in Section 3.1.

       

      “Effective Date” means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
Commission.

       

       “Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(r).

       

      “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

      


      “Exempt Issuance”
means the issuance of (a) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder, (b) shares of Common Stock issued
upon the exercise or conversion of Common Stock Equivalents outstanding on the
date hereof and disclosed on Schedule 3.1(g)
attached to this Agreement, provided the issuance is pursuant to the
terms of such Common Stock Equivalent as disclosed in such disclosure schedules,
(c) securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors, provided that any such
issuance shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the Company
and in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities, and (d) securities sold in
connection with a firm commitment underwritten public offering of shares of
Common Stock that is intended, pursuant to the Company’s Board of Directors
resolution, to produce minimum proceeds (after payment of underwriter’s fees and
commissions) of not less than $30,000,000.

       

      “GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).

       

      “Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(o).

       

      “Legend Removal Date”
shall have the meaning ascribed to such term in Section 4.1(c).

       

      “Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.

       

       “Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).

       

      “Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).

       

      “Maximum Rate” shall
have the meaning ascribed to such term in Section 5.17.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Participation
Maximum” shall have the meaning ascribed to such term in Section
4.13.

       

      “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.

       

      “Placement Agent”
means Midtown Partners & Co., LLC, a Florida corporation.

       

      “Pre-Notice” shall
have the meaning ascribed to such term in Section 4.13.

       

      “Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.

       

      “Purchaser
Party”  shall have the meaning ascribed to such term in Section
4.11.

       

      “Registration Rights
Agreement”  means the Registration Rights Agreement dated the
date hereof, among the Company and the Purchasers, in the form of Exhibit B attached
hereto.

       

      “Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Purchaser as provided for in the Registration Rights
Agreement.

       

      “Required
Approvals”  shall have the meaning ascribed to such term in
Section 3.1(e).

       

      “Required
Minimum”  means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares issuable
upon exercise or conversion in full of all Warrants and Series C Convertible
Preferred Stock (including Underlying Shares issuable as payment of dividends),
ignoring any conversion or exercise limits set forth therein, and assuming that
the Conversion Price is at all times on and after the date of determination 90%
of the then Conversion Price on the Trading Day immediately prior to the date of
determination.

       

      “Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

       

      “SEC
Reports”  shall have the meaning ascribed to such term in
Section 3.1(h).

       

      “Securities”  means
the Series C Convertible Preferred Stock, the Warrants, the Warrant Shares and
the Underlying Shares.

       

      “Securities
Act”  means the Securities Act of 1933, as amended, and the
rules and regulations promulgated hereunder.

       

      “Series C Convertible
Preferred Stock”  means the Series C Convertible Preferred
Stock of the Company, par value $.001, and such designations, preferences and
limitations as are set forth in the Series C Designations.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Series C
Designations”  means the Certificate of Designation,
Preferences and Rights of Series C Convertible Preferred Stock filed with the
State of Nevada on June 24, 2008.

       

      “Series 3
Warrant”  means the Series 3 Common Stock purchase warrants, in
the form of Exhibit C
attached hereto, delivered to the Purchasers at the Closing in accordance with
Section 2.2(a) hereof, which Warrants shall be exercisable immediately and have
a term of exercise equal to 7 years.

       

      “Short
Sales”  shall include all “short sales” as defined in Rule 200
of Regulation SHO under the Exchange Act (but shall not be deemed to include the
location and/or reservation of borrowable shares of Common
Stock). 

       

      “Subscription
Amount”  means, as to each Purchaser, the aggregate amount to
be paid for Series C Convertible Preferred Stock and Warrants purchased
hereunder as specified below such Purchaser’s name on the signature page of this
Agreement and next to the heading “Subscription Amount”, in United States
Dollars and in immediately available funds.

       

      “Subsequent
Financing”  shall have the meaning ascribed to such term in
Section 4.13.

       

      “Subsequent Financing
Notice”  shall have the meaning ascribed to such term in
Section 4.13.

       

      “Subsidiary”  means
any subsidiary of the Company as set forth on Schedule
3.1(a).

       

      “Trading
Day”  means a day on which the Common Stock is traded on a
Trading Market.

       

      “Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq Capital Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.

       

      “Transaction
Documents”  means this Agreement, the Series C Designations,
the Series C Convertible Preferred Stock, the Warrants, the First Amendment to
the Registration Rights Agreement, the Registration Rights Agreement, and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.

       

      “Underlying
Shares”  means the shares of Common Stock issued and issuable
upon conversion or redemption of the Series C Convertible Preferred Stock and
upon exercise of the Warrants and issued and issuable in lieu of the cash
payment of dividends on the Series C Convertible Preferred Stock in accordance
with the terms of the Series C Convertible Preferred Stock.

       

      “VWAP”  means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. New York City time to 4:02 p.m. New York City time); (b)  if the
OTC Bulletin Board is not a Trading Market, the volume weighted average price of
the Common Stock for such date (or the nearest preceding date) on the OTC
Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Company.

       

      “Warrants”  means
the Series 3 Warrants.

       

      “Warrant
Shares”  means the shares of Common Stock issuable upon
exercise of the Warrants.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ARTICLE
II.

      PURCHASE
AND SALE

       

      2.1 Closing.  On
the Closing Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and each Purchaser agrees to
purchase in the aggregate, severally and not jointly, up to $1,750,000 in stated
value of the Series C Convertible Preferred Stock.  Each Purchaser
shall deliver to the Company via wire transfer or a certified check immediately
available funds equal to their Subscription Amount and the Company shall deliver
to each Purchaser their respective Series C Preferred Stock and Warrants as
determined pursuant to Section 2.2(a) and the other items set forth in Section
2.2 issuable at the Closing.  Upon satisfaction of the conditions set
forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of BR or
such other location as the parties shall mutually agree.

       

      2.2 Deliveries

       

      


       

      (a) On the
Closing Date, the Company shall deliver or cause to be delivered to each
Purchaser the following:

       

       

      (i) this
Agreement duly executed by the Company;

       

      (ii) a legal
opinion of Company Counsel, in the form of Exhibit D attached
hereto;

       

      (iii) a Series
C Preferred Stock stock certificate with a stated value equal to such
Purchaser’s Subscription Amount, registered in the name of such
Purchaser;

       

      (iv) a Series
3 Warrant to purchase up to a number of shares of Common Stock equal to 140% of
such Purchaser’s Subscription Amount divided by $0.07, with an exercise price
equal to ten cents ($0.10), subject to adjustment therein,
registered in the name of such Purchaser;

       

      (v) [A] a
Warrant to purchase up to a number of shares of Common Stock equal to 2,500,000,
with an exercise price equal to $.07, subject to adjustment therein, registered
in the name of the Placement Agent, and [B] a Warrant to purchase up to a number
of shares of Common Stock equal to 3,500,000, with an exercise price equal to
$.10, subject to adjustment therein, registered in the name of the Placement
Agent;

       

      (vi) the
Registration Rights Agreement duly executed by the Company; and

       

      (vii)
verification of the completion of closing the new loan facility with State
Financial Corporation, upon terms reasonably satisfactory to the
Purchasers;

      


      (viii) delivery
of [A] the First Amendment to the Lock-up Agreement, [B] Consent and Agreement
of Subordination to the Series C Preferred Stock, [C] an Acknowledgement from
certain junior creditors, each in form and substance satisfactory to the
Purchasers.

      


      (b) On the
Closing Date, each Purchaser shall deliver or cause to be delivered to the
Company the following:

      
         

        (i) 
this Agreement duly executed by such Purchaser;

         

      

      (ii) such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company; and

       

      (iii) the First
Amendment to the Registration Rights Agreement duly executed by such
Purchaser.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      2.3 Closing
Conditions.

       

      (a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

       

      (i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;

       

      (ii) all
obligations, covenants and agreements of the Purchasers required to be performed
at or prior to the Closing Date shall have been performed; and

       

      (iii) the
delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.

       

      (b) The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

       

      (i) the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Company contained herein;

       

      (ii) all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;

       

      (iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;

       

      (iv) there
shall have been no Material Adverse Effect with respect to the Company since the
date hereof; and

       

      (v) from the
date hereof to the Closing Date, trading in the Common Stock shall not have been
suspended by the Commission  or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of each Purchaser, makes it impracticable or inadvisable to
purchase the Series C Convertible Preferred Stock at the Closing.

       

      


       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ARTICLE
III.

      REPRESENTATIONS
AND WARRANTIES

       

      3.1 Representations and
Warranties of the Company.  Except as set forth under the
corresponding section of the disclosure schedules delivered to the Purchasers
concurrently herewith (the “Disclosure
Schedules”) which Disclosure Schedules shall be deemed a part hereof and
to qualify any representation or warranty otherwise made herein to the extent of
such disclosure, the Company and the Shareholder, jointly and severally, hereby
make the representations and warranties set forth below to each
Purchaser.

       

      (a) Subsidiaries.  All
of the direct and indirect subsidiaries of the Company are set forth on Schedule
3.1(a).  Except as set forth on Schedule 3.1(a), The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.  If the Company has no
subsidiaries, then all other references in the Transaction Documents to the
Subsidiaries or any of them will be disregarded.

       

      (b) Organization and
Qualification.  The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently
conducted.  Neither the Company nor any Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

       

      (c) Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby thereby have been duly authorized by all
necessary corporate action on the part of the Company and no further action is
required by the Company, its board of directors or its stockholders in
connection therewith other than in connection with the Required
Approvals.  Each Transaction Document has been (or upon delivery will
have been) duly executed by the Company and, when delivered in accordance with
the terms hereof and thereof, will constitute the valid and binding obligation
of the Company enforceable against the Company in accordance with its terms
except (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

       

      (d) No
Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
other transactions contemplated hereby and thereby do not and will not: (i)
conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) subject to the Required Approvals, conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not have or reasonably be expected to result in a Material Adverse
Effect.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (e) Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.6, (ii) the filing with the
Commission of the Registration Statement, (iii) the notice and/or application(s)
to each applicable Trading Market for the issuance and sale of the Securities
and the listing of the Underlying Shares for trading thereon in the time and
manner required thereby, (iv) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities laws and
(v) the delivery of the notices and the receipt of the approvals set forth on
Schedule 3.1(e)
(collectively, the “Required
Approvals”).

       

      (f) Issuance of the
Securities.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on transfer provided
for in the Transaction Documents.  The Underlying Shares, when issued
in accordance with the terms of the Transaction Documents, will be validly
issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company.  The Company has reserved from its duly authorized capital
stock a number of shares of Common Stock for issuance of the Underlying Shares
at least equal to the Required Minimum on the date hereof.

       

      (g) Capitalization.  The
capitalization of the Company is as set forth on Schedule
3.1(g).  Except as set forth on Schedule 3.1(g), the
Company has not issued any capital stock since its most recently filed periodic
report under the Exchange Act.  Except as set forth on Schedule 3.1(g), no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.  Except as a result of the purchase and sale of
the Securities or as set forth on Schedule 3.1(g),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. Except as set forth on Schedule 3.1(g), the
issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such
securities. All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  Except as set forth on Schedule 3.1(g), no
further approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and sale of the
Securities.  Except as set forth on Schedule 3.1(g),
there are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company’s
stockholders.

       

      (h) SEC Reports; Financial
Statements.  Except as set forth on Schedule 3.1(h), the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for two years preceding
the date hereof (or such shorter period as the Company was required by law or
regulation to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Reports”) on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing.  Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (i) Material
Changes.  Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
a subsequent SEC Report, (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result in a Material
Adverse Effect, (ii) the Company has not incurred any material liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the Commission,
(iii) the Company has not materially altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate. The Company
does not have pending before the Commission any request for confidential
treatment of information.  Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(i), no
event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition, that is required to be disclosed by the Company on Form
8-K under the Exchange Act at the time this representation is made that has not
been publicly disclosed at least one Trading Day prior to the date that this
representation is made.

       

      (j) Litigation.  Except
as set forth on Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect.  Neither the Company nor any
Subsidiary, nor, to the knowledge of the Company, any director or officer
thereof, is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty.  There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or, to the knowledge of the
Company, former director or officer of the Company.  The Commission
has not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.

       

      (k) Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.  None of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s relationship with the Company,
and neither the Company or any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe that their
relationships with their employees are good.  No executive officer, to
the knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant, and, to the knowledge of the
Company, the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters. To the knowledge of the Company, the Company and
its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure
to be in compliance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

       

      (l) Compliance.  Neither
the Company nor any Subsidiary (i) is in material default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) to the knowledge of the
Company, is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business and all such laws that affect the
environment, except in each case as could not have or reasonably be expected to
result in a Material Adverse Effect.

       

      (m) Regulatory
Permits.  The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not have or reasonably be expected to result in a
Material Adverse Effect (“Material Permits”),
and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (n) Title to
Assets.  The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties and Liens set
forth on Schedule
3.1(n) (the “Permitted
Liens”).  Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in
compliance.

       

      (o) Patents and
Trademarks.  The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the “Intellectual Property
Rights”).  Neither the Company nor any Subsidiary has received
a notice (written or otherwise) that the Intellectual Property Rights used by
the Company or any Subsidiary violates or infringes upon the rights of any
Person unless such notice has been resolved without a Material Adverse Effect.
To the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.  The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy, confidentiality
and value of all of their intellectual properties, except where failure to do so
could not, individually or in the aggregate, reasonably be expect to have a
Material Adverse Effect.

       

      (p) Insurance.  The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged.  Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.

       

      (q) Transactions With Affiliates
and Employees.  Except as set forth in the SEC Reports, none of
the officers, directors or other Affiliates of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $60,000 other than (i) for payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.

       

      (r) Sarbanes-Oxley; Internal
Accounting Controls.  The Company is in material compliance
with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date.  The Company’s certifying officers have
evaluated the effectiveness of the Company’s internal controls and disclosure
controls and procedures as of the end of the period covered by the Company’s
most recently filed periodic report under the Exchange Act (such date, the
“Evaluation
Date”).  The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date.  Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.

       

      (s) Certain
Fees.  Except as set forth on Schedule 3.1(s), no
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents.  The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.

       

      (t) Private Placement.
Assuming the accuracy of the Purchasers representations and warranties set forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.

       

      (u) Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.  The Company shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (v) Registration
Rights.  Other than each of the Purchasers or as set forth on
Schedule
3.1(v), no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the
Company.

       

      (w) Listing and Maintenance
Requirements.  The Company is obligated to file periodic
reports under the Exchange Act pursuant to Section 15(d) of the Exchange Act,
and the Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating such reporting obligation under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such reporting obligation.  Except as set
forth on Schedule
3.1(w), the Company has not, in the 24 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance
requirements.

       

      (x) Application of Takeover
Protections.  The Company and its Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

       

      (y) Disclosure.  Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or
might constitute material, nonpublic information.  The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company.  All disclosure furnished by or on behalf of the Company to
the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Disclosure Schedules to this Agreement, with
respect to the representations and warranties made herein are true and correct
with respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company acknowledges and agrees
that no Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.

       

      (z) No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval provision of any
Trading Market on which any of the securities of the Company are listed or
designated.

       

      (aa) Solvency.  Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be
paid.  The Company does not intend to incur debts beyond its ability
to pay such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).  The Company has no
knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date.  Schedule 3.1(aa) sets
forth as of the dates thereof all outstanding secured and unsecured Indebtedness
of the Company or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $25,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP.  Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (bb) Tax
Status.  Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any
Subsidiary.

       

      (cc) No General
Solicitation.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising.  The Company has offered
the Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act.

       

      (dd) Foreign Corrupt
Practices.  Neither the Company, nor to the knowledge of the
Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended.

       

      (ee) Auditors.  The
Company’s auditors are set forth on Schedule 3.1(ee) of
the Disclosure Schedule.  To the knowledge of the Company, such
auditors, who the Company expects will express their opinion with respect to the
financial statements to be included in the Company’s Annual Report on Form 10-K
for the year ended April 30, 2008 are a registered public accounting firm as
required by the Securities Act.

       

      (ff) Seniority.  Except
as set forth on Schedule 3.1(ff), as
of the Closing Date, no Indebtedness or other claim against the Company is
senior to the Series C Convertible Preferred Stock in right of payment, whether
with respect to dividends or upon liquidation or dissolution, or otherwise,
other than indebtedness secured by purchase money security interests (which is
senior only as to underlying assets covered thereby) and capital lease
obligations (which is senior only as to the property covered
thereby).

       

      (gg) No Disagreements with
Auditors and Lawyers.  To the knowledge of the Company, there
are no material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the auditors and
lawyers formerly or presently employed by the Company and, except as set forth
on Schedule
3.1(gg), the Company is current with respect to any fees owed to its
auditors and lawyers.

       

      (hh) Acknowledgement Regarding
Purchasers’ Trading Activity.  Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and
4.16 hereof), it is understood and acknowledged by the Company (i) that none of
the Purchasers have been asked to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) that past or future open market or other
transactions by any Purchaser, including Short Sales, and specifically
including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities;
(iii) that any Purchaser, and counter-parties in “derivative” transactions to
which any such Purchaser is a party, directly or indirectly, presently may have
a “short” position in the Common Stock, and (iv) that each Purchaser shall not
be deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.  The Company further
understands and acknowledges that (a) one or more Purchasers may engage in
hedging activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Underlying Shares deliverable with respect to Securities are being
determined and (b) such hedging activities (if any) could reduce the value of
the existing stockholders' equity interests in the Company at and after the time
that the hedging activities are being conducted.  The Company acknowledges
that such aforementioned hedging activities do not constitute a breach of any of
the Transaction Documents.

       

      (ii) Manipulation of
Price.  The Company has not, and to its knowledge no one acting on
its behalf has, (i) taken, directly or indirectly, any action designed to cause
or to result in the stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of any of the Securities, (ii)
except as set forth on Schedule 3.1(jj),
sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the securities of the Company or (iii) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the
Securities.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.2 Representations and
Warranties of the Purchasers.  Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date hereof
and as of the Closing Date to the Company as follows:

       

      (a) Organization;
Authority.  Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution, delivery and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser.  Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

       

      (b) Own Account. Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law and has
no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities (this representation
and warranty not limiting such Purchaser’s right to sell the Securities pursuant
to the Registration Statement or otherwise in compliance with applicable federal
and state securities laws) in violation of the Securities Act or any applicable
state securities law.  Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.

       

      (c) Purchaser
Status.  At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises any
Warrants or converts any Series C Convertible Preferred Stock it will be either:
(i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act.  Such
Purchaser is not required to be registered as a broker-dealer under Section 15
of the Exchange Act.

       

      (d) Experience of Such
Purchaser.  Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment.  Such Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.

       

      (e) General
Solicitation.  Such Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

       

      (f) Short Sales and
Confidentiality
Prior To The Date Hereof.  Other than the transaction
contemplated hereunder, such Purchaser has not directly or indirectly, nor has
any Person acting on behalf of or pursuant to any understanding with such
Purchaser, executed any disposition, including Short Sales, in the
securities of the Company during the period commencing from the time that such
Purchaser first received a term sheet (written or oral) from the Company or any
other Person setting forth the material terms of the transactions contemplated
hereunder until the date hereof (“Discussion
Time”).  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the portion of
assets managed by the portfolio manager that made the investment decision to
purchase the Securities covered by this Agreement.  Other than to
other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this
transaction).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ARTICLE
IV.

      OTHER
AGREEMENTS OF THE PARTIES

       

      4.1 Transfer
Restrictions.

       

      (a) The
Securities may only be disposed of in compliance with state and federal
securities laws.  In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated
in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Registration Rights
Agreement.

       

      (b) The
Purchasers agree to the imprinting, so long as is required by this Section 4.1,
of a legend on any of the Securities in the following form:

       

      [NEITHER]
THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.  THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON [EXERCISE] [CONVERSION] OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

       

      (c) Certificates
evidencing the Underlying Shares shall not contain any legend (including the
legend set forth in Section 4.1(b) hereof): (i) while a registration statement
(including the Registration Statement) covering the resale of such security is
effective under the Securities Act, or (ii) following any sale of such
Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission).  If all or any portion of the Series C Preferred Stock or
Warrant is converted or exercised (as applicable) at a time when there is an
effective registration statement to cover the resale of the Underlying Shares,
or if such Underlying Shares may be sold under Rule 144(k) or if such legend is
not otherwise required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission) then such Underlying Shares shall be issued free of all
legends.  The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c), it
will, no later than three Trading Days following the delivery by a Purchaser to
the Company or the Company’s transfer agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend (such fifth
Trading Day, the “Legend Removal
Date”), and required opinion of counsel, if any, deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is free
from all restrictive and other legends.  The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this
Section.  Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the transfer agent of the Company to the
Purchasers by crediting the account of the Purchaser’s prime broker with the
Depository Trust Company System.

      


      (d) In
addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the
date such Securities are submitted to the Company’s transfer agent) delivered
for removal of the restrictive legend and subject to Section 4.1(c), $10 per
Trading Day (increasing to $20 per Trading Day 10 Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend Removal Date
until such certificate is delivered without a legend.  Nothing herein
shall limit such Purchaser’s right to pursue actual damages for the Company’s
failure to deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.

       

      (e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees that the
removal of the restrictive legend from certificates representing Securities as
set forth in this Section 4.1 is predicated upon the Company’s reliance that the
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are sold
pursuant to a Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.2 Acknowledgment of
Dilution.  The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of Common Stock,
which dilution may be substantial under certain market
conditions.  The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Underlying Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim the Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the other
stockholders of the Company.

       

      4.3 Furnishing of
Information.  As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act.  As long
as any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, to the extent required from time to time to
enable such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule
144.

       

      4.4 Integration.  The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market.

       

      4.5 Conversion and Exercise
Procedures.  The form of Notice of Exercise included in the
Warrants and the form of Notice of Conversion included in the Series C
Convertible Preferred Stock set forth the totality
of the procedures required of the Purchasers in order to exercise the Warrants
or convert the Series C Convertible Preferred Stock.  The Company
shall honor exercises of the Warrants and conversions of the Series C
Convertible Preferred Stock and shall deliver Underlying Shares in accordance
with the terms, conditions and time periods set forth in the Transaction
Documents.

       

      4.6 Securities Laws Disclosure;
Publicity.  The Company shall, by 8:30 a.m. New York City time
on the Trading Day following the date hereof, issue a Current Report on Form 8-K
disclosing the material terms of the transactions contemplated hereby and shall
attach the Transaction Documents thereto.

       

      4.7 Shareholder Rights
Plan.  No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an
“Acquiring Person” under any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction
Documents or under any other agreement between the Company and the
Purchasers.

       

      4.8 Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information.  The Company
understands and confirms that each Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the
Company.

       

      4.9 Use of
Proceeds.  Except as set forth on Schedule 4.9 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company’s debt (other than payment of trade payables in the
ordinary course of the Company’s business and prior practices), to redeem any
Common Stock or Common Stock Equivalents or to settle any outstanding
litigation.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.10 Reimbursement.  If
any Purchaser becomes involved in any capacity in any Proceeding by or against
any Person who is a stockholder of the Company (except as a result of sales,
pledges, margin sales and similar transactions by such Purchaser to or with any
other stockholder), solely as a result of such Purchaser’s acquisition of the
Securities from the Company under this Agreement, the Company will reimburse
such Purchaser for its reasonable legal and other expenses (including the cost
of any investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.  The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the Purchasers nor
any such Affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.

       

      4.11 Indemnification of
Purchasers.  Subject to the provisions of this Section 4.11,
the Company will indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling person (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or
malfeasance).  If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party.  Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel.  The Company will not be liable to any Purchaser Party under
this Agreement (i) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s breach of any of
the representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents.

       

      4.12 Reservation and Listing of
Securities.

       

      (a) The
Company shall maintain a reserve from its duly authorized shares of Common Stock
for issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction
Documents.

       

      (b) If, on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then the
Board of Directors of the Company shall use commercially reasonable efforts to
amend the Company’s certificate or articles of incorporation to increase the
number of authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event not later
than the 75th day after such date.

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.13 Participation in Future
Financing.

       

      (a) From the
date hereof until the date that is the 12 month anniversary of the Closing Date,
upon any issuance by the Company or any of its Subsidiaries of Common Stock or
Common Stock Equivalents (a “Subsequent
Financing”), each Purchaser shall have the right to participate in up to
an amount of the Subsequent Financing equal to 100% of the Subsequent Financing
(the “Participation
Maximum”) on the same terms, conditions and price provided for in the
Subsequent Financing.

       

      (b) At least
10 Trading Days prior to the closing of the Subsequent Financing, the Company
shall deliver to each Purchaser a written notice of its intention to effect a
Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing
Notice”).  Upon the request of a Purchaser, and only upon a
request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than 1 Trading Day after such request, deliver a
Subsequent Financing Notice to such Purchaser.  The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised thereunder,
the Person or Persons through or with whom such Subsequent Financing is proposed
to be effected, and attached to which shall be a term sheet or similar document
relating thereto.

       

      (c) Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the 10th Trading
Day after all of the Purchasers have received the Pre-Notice that the Purchaser
is willing to participate in the Subsequent Financing, the amount of the
Purchaser’s participation, and that the Purchaser has such funds ready, willing,
and available for investment on the terms set forth in the Subsequent Financing
Notice.  If the Company receives no notice from a Purchaser as of such
10th
Trading Day, such Purchaser shall be deemed to have notified the Company that it
does not elect to participate.

       

      


      (d) If by
5:30 p.m. (New York City time) on the 10th Trading
Day after all of the Purchasers have received the Pre-Notice, notifications by
the Purchasers of their willingness to participate in the Subsequent Financing
(or to cause their designees to participate) is, in the aggregate, less than the
total amount of the Subsequent Financing, then the Company may effect the
remaining portion of such Subsequent Financing on the terms and with the Persons
set forth in the Subsequent Financing Notice.

       

      (e) If by
5:30 p.m. (New York City time) on the 10th Trading
Day after all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers seeking to
purchase more than the aggregate amount of the Participation Maximum, each such
Purchaser shall have the right to purchase the greater of (a) their Pro Rata
Portion (as defined below) of the Participation Maximum and (b) the difference
between the Participation Maximum and the aggregate amount of participation by
all other Purchasers.  “Pro Rata Portion” is
the ratio of (x) the Subscription Amount of Securities purchased on the Closing
Date by a Purchaser participating under this Section 4.13 and (y) the sum of the
aggregate Subscription Amounts of Securities purchased on the Closing Date by
all Purchasers participating under this Section 4.13.

       

      (f) The
Company must provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set forth above in
this Section 4.13, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 60 Trading Days after the date of the
initial Subsequent Financing Notice.

       

      (g) Notwithstanding
the foregoing, this Section 4.13 shall not apply in respect of (i) an Exempt
Issuance, (ii) an underwritten public offering of Common Stock and (iii)
dividends required to be paid under the terms and conditions of certain
outstanding securities of the Company, as set forth on Schedule 3.1(g),
which are paid in shares of Common Stock, provided that the terms of such
securities shall not have been amended since the date of this
Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.14 Subsequent Equity
Sales.

       

      (a) Unless
Purchasers holding in the aggregate at least 66% of the stated value of the then
outstanding Series C Convertible Preferred Stock shall otherwise consent in
writing, from the date hereof until 90 days after the Effective Date, neither
the Company nor any Subsidiary shall issue shares of Common Stock or Common
Stock Equivalents; provided, however, the 90 day
period set forth in this Section 4.14 shall be extended for the number of
Trading Days during such period in which (i) trading in the Common Stock is
suspended by any Trading Market, or (ii) following the Effective Date, the
Registration Statement is not effective or the prospectus included in the
Registration Statement may not be used by the Purchasers for the resale of the
Underlying Shares.

       

      (b) From the
date hereof until such time as no Purchaser holds any of the Securities, the
Company shall be prohibited from effecting or entering into an agreement to
effect any Subsequent Financing involving a “Variable Rate
Transaction”.  The term “Variable Rate
Transaction” shall mean a transaction in which the Company issues or
sells (i) any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion, exercise or exchange rate or other price that
is based upon and/or varies with the trading prices of or quotations for the
shares of Common Stock at any time after the initial issuance of such debt or
equity securities, or (B) with a conversion, exercise or exchange price that is
subject to being reset at some future date after the initial issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into any agreement, including, but not limited
to, an equity line of credit, whereby the Company may sell securities at a
future determined price.

       

      (c) Notwithstanding
the foregoing, this Section 4.14 shall not apply in respect of (i) an Exempt
Issuance, provided that no Variable Rate Transaction shall be an Exempt
Issuance, and (ii) dividends required to be paid under the terms and conditions
of certain outstanding securities of the Company, as set forth on Schedule 3.1(g),
which are paid in shares of Common Stock, provided that the terms of such
securities shall not have been amended since the date of this
Agreement

       

      4.15 Equal Treatment of
Purchasers.  No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents.  Further, the Company
shall not make any payment of stated value or dividends on the Series C
Convertible Preferred Stock in amounts which are disproportionate to the
respective stated value outstanding on the Series C Convertible Preferred Stock
at any applicable time.  For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

       

      4.16 Form D; Blue Sky
Filings.  The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption for, or to qualify the Securities for, sale to the Purchasers at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

       

      4.17           Capital
Changes.  Until the one year anniversary of the Effective Date,
the Company shall not undertake a reverse or forward stock split or
reclassification of the Common Stock without the prior written consent of the
Purchasers holding a majority in stated value outstanding of the Series C
Convertible Preferred Stock.

       

      4.18.                      Most Favored Nation
Provision.  From the date hereof until the date that is the 24
month anniversary of the Closing Date, if the Company effects a Subsequent
Financing, each Purchaser may elect, in its sole discretion, to exchange all or
some of the Series C Convertible Preferred Stock then held by such Purchaser for
any securities issued in a Subsequent Financing based on the aggregate stated
value of such Series C Convertible Preferred Stock, along with any accrued but
unpaid dividends and other amounts owing thereon, and the effective price at
which such securities were sold in such Subsequent Financing; provided, however, that this
Section 4.18 shall not apply with respect to an Exempt Issuance.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ARTICLE
V.

      MISCELLANEOUS

       

      5.1 Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before June 26, 2008;
provided, however, that no such
termination will affect the right of any party to sue for any breach by the
other party (or parties).

       

      5.2 Fees and
Expenses.  At the Closing, the Company has agreed to reimburse
the Purchasers the non-accountable sum of $75,000 for its due diligence, legal
fees and expenses.  Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement.  The Company shall pay all
transfer agent fees, stamp taxes and other taxes and duties levied in connection
with the delivery of any Securities to the Purchasers.

       

      5.3 Entire
Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.

       

      5.4 Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given.  The address for such notices and
communications shall be as set forth on the signature pages attached
hereto.

       

      5.5 Amendments;
Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and Purchasers that hold in the aggregate
at least 66% of the stated value of the then outstanding Series C Convertible
Preferred Stock, or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought.  No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such
right.

       

      5.6 Headings.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

       

      5.7 Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each Purchaser (other
than by merger).  Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchasers”.

       

      5.8 No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.11.

       

      5.9 Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law.  The parties hereby waive all rights to a trial by
jury.  If either party shall commence an action or proceeding to
enforce any provisions of the Transaction Documents, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or
proceeding.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.10 Survival.  The
representations, warranties, covenants and other agreements contained herein
shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for a period of 3 years from the date of this
Agreement.

       

      5.11 Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “pdf” signature page were an original thereof.

       

      5.12 Severability.  If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

       

      5.13 Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, in the case
of a rescission of a conversion of the Series C Preferred Stock or exercise of a
Warrant, the Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice.

       

      5.14 Replacement of
Securities.  If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefore, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

       

      5.15 Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.16 Payment Set Aside. To
the extent that the Company makes a payment or payments to any Purchaser
pursuant to any Transaction Document or a Purchaser enforces or exercises its
rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

       

      5.17 Usury.  To
the extent it may lawfully do so, the Company hereby agrees not to insist upon
or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever
enacted, now or at any time hereafter in force, in connection with any claim,
action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document.  Notwithstanding
any provision to the contrary contained in any Transaction Document, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate.  It is agreed that if
the maximum contract rate of interest allowed by law and applicable to the
Transaction Documents is increased or decreased by statute or any official
governmental action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser’s election.

       

      5.18 Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any
way for the performance or non-performance of the obligations of any other
Purchaser under any Transaction Document.  Nothing contained herein or
in any other Transaction Document, and no action taken by any Purchaser pursuant
thereto, shall be deemed to constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents.  Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.  Each Purchaser
has been represented by its own separate legal counsel in their review and
negotiation of the Transaction Documents.

       

      5.19 Construction.  The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.

       

      (Signature
Pages Follow)

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories on June
______, 2008, effective as of the date first indicated above.

       

      
        	
                GLOBAL
      DIVERSIFIED INDUSTRIES, INC.

                 

                 

              	
                Address for Notice:

              
	
                By:__________________________________________

                 

                     Name:

                 

                     Title:

                 

              	
                1200
      Airport Drive

                Chowchilla,
      CA 93610

              
	
                With
      a copy to (which shall not constitute notice):

                 

                 

                 

              	 
      
	 
      	 
      
	
                PHILLIP
      O. HAMILTON

                 

                 

                _____________________________________________

                By:
      Phillip O. Hamilton, individually

                 

                 

              	 
      


      

      


      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

      SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      [PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      


      IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

       

      Name of
Purchaser: _______________________________________________________

      Signature of Authorized Signatory of
Purchaser: ________________________________

      Name of
Authorized Signatory:
______________________________________________

      Title of
Authorized Signatory:
_______________________________________________

      Email
Address of Purchaser:
________________________________________________   

      Facsimile
Number of Purchaser: ______________________________________________

      


      Address
for Notice of Purchaser:

      


      


      


      


      Address
for Delivery of Securities for Purchaser (if not same as above):

      


      


      


      


      


      Subscription
Amount:

      Warrant
Shares:

      


      


      


      


      EIN
Number:

      


      [SIGNATURE
PAGES CONTINUE]